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Grain Insurance In Development To Help Manage Seasonal Risk

06 December 2010

AUSTRALIA - The Department of Agriculture and Food is working with the Western Australian grains industry to develop commercial insurance products, allowing growers to better manage seasonal risk.

A diverse group of the agriculture supply chain, including the banking and insurance sectors, farm consultants, grain traders and farmer groups, met recently to discuss options for index-based insurance or derivative products to manage seasonal risk.

Index-based insurance or derivative products are similar to traditional insurance, except the payout is based on weather, such as the amount of rainfall or modeled yield levels, rather than actual yields.

Two recognised experts in the field of index-based insurance, Professor Jerry Skees from the University of Kentucky and GlobalAg Risk President and Associate Professor Greg Hertzler from the University of Sydney, led discussion at the forum.

The group agreed there was a need for a range of risk mitigation products to meet the diverse needs of growers and industry, said Department Grains Industry Executive Director Peter Metcalfe. A key finding was that government should provide independent data, information and improved yield models to foster the development of risk mitigation products.

"The department is working with potential providers in the private sector to achieve this and help progress the development of these insurance products."

The forum discussion covered the changing climate in Western Australia, insurance approaches already in existence and existing alternatives that are operating internationally.

"There are several products in the market currently available to Western Australian growers that can insure some seasonal risk," Metcalfe said. "The department will encourage the further participation of the commercial developers of these products."

Skees said the global experience had shown that if governments are not clear about their position in terms of underwriting or supporting the development of risk mitigation products, the commercial sector will not commit to developing strategies on a commercial basis.

TheCropSite News Desk

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